ponderings: health care

[cellio]

In the comments here we were talking about health care in the US. The current system is broken in many ways, but the "nuke it and start over with some nationalized program" proposals are scary too. What incremental improvements are possible? I have to believe that there are some.

One idea I'm interested in is what would happen if we separated paying for routine care from paying for catastrophic care. What would happen if people could be on their own for the former but could buy a policy to cover hospitalizations, major illnesses, and the like? How effective would that be and what would it tend to cost? What would having that in play do to the over-the-counter (uninsured) price of routine care? (Yes, I know that not everyone can afford to pay for routine care out of pocket. I'm exploring a suite of options, not choosing a single one.)

On the flip side, would medical practices or insurance companies be willing to sell affordable plans that cover all your routine care (only), if they were not on the hook for catastrophic losses? Could that get things down to the point where the average family could afford regular checkups, preventative care, and routine tests (which helps prevent some catastrophic issues)? Such plans exist now in niches (vision and dental, most commonly in my experience), but I haven't heard of one for general medical care. Why not? (Am I totally misunderstanding where the profit centers are in the insurance business?)

Both angles are important. What I'm labelling catastrophic incidents are (as the label implies) financially devastating if you don't have sufficient coverage. Outside of elder-care issues I'm not sure how common they are, but it's the sort of thing I wouldn't want to take a chance on. I insure my car and house, after all -- how much the moreso should I insure my health?

What I suspect has a bigger impact on the poor, though, is the routine care. If you don't have insurance, you're looking at a three-digit number to walk into your doctor's office. Throw in some kids and you're in trouble. (This is why I asked what would happen to those costs if catastrophic care were a separate factor.) Could plans that just cover routine care be made affordable enough for most people? This doesn't solve the other problem, but neither does the current system -- we rely on hospitals' obligations to treat (which is a legitimate public demand while they pay no taxes), or medicaid/medicare/SSI in some cases, to get through those. Remember, incremental improvement.

I'd also like to explore the effects of reducing drug regulation, letting people buy from anywhere that's selling and reducing barriers to getting things onto the market. I know the standard argument against this (those high prices pay for R&D), but I'm not sure how much I believe that. What are the other considerations?

Where else could we look for incremental improvements?

(In case you haven't figured it out, I am not a medical professional, an economist, nor part of the insurance industry.)

Comments

[jducoeur]

Honestly, I'm pretty suspicious of incremental changes at this point. The current system is so deeply vested right now that it is likely to run rings around incremental changes, finding ways to work around them. I mean, remember that there are hundreds of billions of dollars at stake here, and it's not very hard for the entrenched players to tweak incremental changes as they come so that they don't lose as much money. So purely from a political standpoint, I think it's actually fairly unlikely that incremental changes will *succeed* in saving money: there's too much stacked against them.

(Nuking the system is in some respects even harder to accomplish, but stands a somewhat better chance of succeeding in saving money, simply because the power structures for gaming the system wouldn't be in place yet.)

On the specifics: I really don't think you can duck the definitions question here. The issue of what constitutes "routine" vs. "catastrophic" is totally central to this idea, and every company has considerable incentives to make sure that any given procedure does *not* fall into their bailiwick. So my guess is that you're actually going to need a whole new government bureaucracy, just to manage to extremely subtle definitional problem and keep the end users from getting very badly screwed.

(The market-purist response to this is that companies that go too far in avoiding their responsibilities will lose business to better ones. That would be correct in a large and thriving market, but absolutely not in one dominated by a few giants. And currently the system is so *complicated* that only giants can survive. The result is a far cry from a properly competitive market. If you want the central problem from a libertarian POV, that's it.)

This is made even worse by the fact that one day's "catastrophic" incident becomes tomorrow's "routine" one. It's actually fairly hard to see a system that *doesn't* somehow wind up in the government's lap when someone has a long-term but survivable-if-treated issue. Ultimately, it comes down to a moral question: are we willing to let these people die for lack of personal funds? (Or, putting a cooler spin on it, how much are we as a society willing to collectively invest in people whose healthcare requirements are beyond their means? And how do we make that decision?)

I'm sympathetic to not trusting the concentration of power inherent in a single-payer system. But it's important to also recognize that an oligopoly can often be even worse, and a poorly-regulated oligopoly (which we more or less have today) is often the worst possible alternative...

[cellio]

Honestly, I'm pretty suspicious of incremental changes at this point.

They do have to be done carefully and it might be possible, but I think it'll be easier to implement. You would like to completely cut over to something else; I think enough people oppose that that it's not going to happen. Incremental change is better than none at all (assuming it demonstrates some improvement). That's what led me to think along these lines.

The issue of what constitutes "routine" vs. "catastrophic" is totally central to this idea, and every company has considerable incentives to make sure that any given procedure does *not* fall into their bailiwick.

Instead of categorizing care, does it make sense to just set the bar at a number? This policy covers your medical care up to $10K (say), which is enough to cover the annual physical, getting the flu or strep throat or the like a couple times, mammogram, some drugs, etc. If you go over that, your bigger policy (if you bought one) kicks in. (Like short-term/long-term disability, but for medical care.)

Governments and de-facto monopolies are both problematic when it comes to the customers.

[jducoeur]

I still see some serious problems. For instance, how do you define that $10k (or whatever) limit? If it's by amount charged, then the "routine" company actually has incentives to inflate the numbers, so that things get bumped into the "catastrophic" company's range.

In general, the idea of splitting the responsibility just strikes me as fundamentally dangerous: the tension of two categories of companies, each with the incentive to maximize how much they charge but bump as much as possible into the other bucket, is very hard to balance without extremely firm and clear rules...

[cellio]

How do other dollar-delimited insurance policies where the insurance company does the assessments handle the problem? If I need to make a claim on my home or auto policy the insurance company decides how much I get; I can try to submit evidence (e.g. bids) to influence them, but they decide and my only recource then is the courts. It is obviously in their interests to pay out as little as possible. Yet, when I've needed to make claims on those policies I've gotten fair outcomes. (I have never had to make a claim on my umbrella policy and hope that continues.)

You might well be right that splitting this out into two types of health insurance isn't viable, but other types of insurance seem to do similar things and I'm trying to understand what's different about them. My auto liability policy tops out at some number and should I do more damage than that, it's my problem -- or, rather, my umbrella policy's problem. Isn't that similar to buying a policy that covers care up to a certain amount only (with an option to buy a different policy for bigger stuff)?

A possible counte-argument (see, I can argue both sides!) is that my auto-insurance policy is affordable both because of the limited liability and the fact that I haven't made claims, yet the whole point of routine health coverage is that you do go get that care, so of course you're going to make claims. If doing that drives up the price too much, then this isn't analogous to auto or home insurance. I'll admit that I have not, lately, taken a good look at my auto-insurance price structure -- how the price is affected by small claims, large claims, accidents hat are my fault, and accidents that are not my fault.